Fintech companies in search of a plan B after Aadhaar data blockade

Experts feel Aadhaar-based eKYC should be allowed for regulated entities on a voluntary basis

With fintech players being completely blocked out of the Aadhaar authentication infrastructure, the fledgling industry is trying to develop alternative mechanisms of using technology to authenticate its customers.

While awaiting instruction from the Reserve Bank of India on acceptable ways to do KYC post the Supreme Court’s judgement on Aadhaar, they are trying to work out means around digital KYC.

“All eKYC authentication is stopped now, we are trying to develop our own means of getting KYC done with physical documents by using technology so that cost can be reduced,” said a top executive of a payment company on condition of anonymity.

The industry is awaiting final directions from the central bank regarding alternative mode of authentication now that eKYC is not acceptable, said another top executive of a mobile wallet company.

Through industry bodies like the Payments Council of India and Digital Lenders’ Association of India, fintech players are understood to have already made multiple representations to the sector regulators to device ways for them to carry on customer onboarding using Aadhaar.

“Aadhaar-based eKYC should be allowed for regulated entities on a voluntary basis…this will meet the test of proportionality and hence would not violate the privacy of the person as well,” said Adhil Shetty, chief executive officer, BankBazaar, an online lending marketplace.

While nothing has been finalised yet, a top executive of a Mumbai-based technology startup said there are ways to detect tampering on physical documents. By accepting a photograph of the physical document along with the picture of the applicant at the time of the application, customers can still be on boarded digitally by fintech companies.

“We can use the time stamp of the picture taken during the time of application and use our technology capabilities to match with the pictures of physical documents to ensure that companies can abide by the ‘Original Seen and Verified’ guidelines of the RBI,” he said.

“Our tech can also detect tampering of the document remotely and does not mandatorily require physical presence.” However, all these mechanisms will only be usable once the RBI clearly accepts these as an authentication mechanism in a fresh circular. Till then, companies will have to rely on physical collection of paper documents which causes operational costs to shoot up.

In a parallel development, in a circular dated November 1, UIDAI extended the deadline for implementation of virtual Aadhaar till January 31, 2019. ET has seen a copy of the circular.

But industry insiders say that it will not affect fintech players and benefit banks only for their DBT (Direct Benefit Transfer) accounts, since Aadhaar cannot be used for authentication for anything else.

“What the UIDAI has said deals with deadlines that were set before the Supreme Court judgement and does not touch upon the real issues around Aadhaar’s applicability in multiple use cases,” said Ashok Hariharan, founder of Idfy which offers authentication services for startups.

“It holds relevance for only those private companies which deal with subsidies and is for storing of past data only, not the others since the Supreme Court has completely prohibited them from using Aadhaar for authentication and the RBI is yet to come out with fresh guidelines on digital KYC.

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